What happened
Shares of Blue Apron Holdings (APRN) traded down more than 6% after hours Thursday following the meal-kit company's announcement that it intends to do a 1-for-15 reverse stock split to boost its share price and remain in compliance with listing rules.
The reverse split is expected to be effective after market close on June 14, and will reduce Blue Apron's class A shares from nearly 100 million to about 6.7 million, and class B shares from 96.4 million to 6.4 million.
So what
Blue Apron's troubles are well documented, with the company disclosing last month that its paying customers are down 30% from a year prior and are just half of its peak number, set two years ago. The company claimed the reduction is in part by design, saying that it is focused on retaining the customers it has instead of the costly exercise of marketing to win new business.
Image source: Getty Images.
But investors haven't stayed around, either. Shares have lost more than 90% of their value in the less than two years since Blue Apron's initial public offering, and have traded below $1 per share for more than a month.
Blue Apron on May 20 said it was considering a reverse split to boost the share price, saying "the company believes that the increased market price that is expected as a result of implementing the reverse stock split will improve the marketability and liquidity of the company's class A common stock and may encourage interest and trading in the stock."
The announcement followed Blue Apron receiving written notice from the New York Stock Exchange on May 17 that its class A shares had fallen below the exchange's listing standard, which requires that the average closing price of a stock not be less than $1 per share over a period of 30 consecutive trading days.
Now what
A reverse split doesn't solve any of Blue Apron's problems, but it does buy it time by ensuring the company remains in compliance with listing requirements. Investors will soon see a higher share price, but the overall value of their shares will not change.
Blue Apron has a new CEO, Linda Kozlowski, who is in the early stages of enacting a turnaround designed to restore growth and push the company toward profitability. The market is yet to be convinced the plan will work, but at least now she has a little more time.
